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Where Taxpayers and Advisers Meet

Rented house

Posts: 3
Joined: Fri Jan 10, 2020 9:12 pm

Rented house

Postby Snaffalot » Fri Jan 10, 2020 9:41 pm

I have a second property which I used to live in, but now rent out. But have concerns over the changes in PRR/Lettings relief, it seems the longer I keep it, the higher the proportion I will have to pay CGT on when I/we finally sell. With a stagnant property market, future gains may not be there to outstrip this cost.

I'm thinking of adding by 'transfer of equity' my long term partner (not married and no mortgage on this house), assuming equal share.
I am I right in thinking at the point of gifting CGT is due by me on the portion gifted? I could then use a later years CGT allowance when we finally sell?

That way we could use the CGT allowance 3 times between us, once at transfer and once again, each, at selling.

An alternate thought, would be to gift her the whole house to 'lock in' the current CGT and start again! We are very trusting of each other.

Posts: 7885
Joined: Wed Aug 06, 2008 3:25 pm

Re: Rented house

Postby maths » Sat Jan 11, 2020 4:59 pm

The changes re PPR/lettings relief from 6 April 2020 are disadvantageous for CGT purposes.

On any future sale by you and co-habitee your co-habitee will not be able to take advantage of any PPR wrt her/his capital gain.

A transfer to co-habitee on or before 5 April 2020 may be sensible; transfer the % which enables you to use your PPR and lettings relief and annual exempt amount producing a nil capital gain. If you and co-habitee are subject to different rates of CGT (18%/28% depending upon level of taxable income) this may impact on strategy.

Posts: 3
Joined: Fri Jan 10, 2020 9:12 pm

Re: Rented house

Postby Snaffalot » Mon Jan 13, 2020 8:35 am

Thanks for the response, I'm planning to go ahead with transfer of 50% before 5 April 2020.

As my partner is not 'spouse' in the eyes of HMRC, I think I need to declare CGT on the portion gifted, is this correct? Seems to be of advantage, for future declarations.

Would anyone know what would be acceptable estimate of valuation? If I estimate would it be better to make a higher valuation to keep HMRC happy? It makes no difference to the CGT payable at this point, though I'm wondering if they would get upset when finally selling the house (in years to come).

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